Chevron (CVX) Showing Signs Of Being A Roof Leaker

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Chevron ( CVX) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Chevron as such a stock due to the following factors:

  • CVX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $634.9 million.
  • CVX has traded 566,167 shares today.
  • CVX is trading at 1.59 times the normal volume for the stock at this time of day.
  • CVX crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on CVX:

Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company operates in two segments, Upstream and Downstream. The stock currently has a dividend yield of 3.2%. CVX has a PE ratio of 10.1. Currently there are 10 analysts that rate Chevron a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Chevron has been 5.9 million shares per day over the past 30 days. Chevron has a market cap of $237.8 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.09 and a short float of 0.9% with 3.43 days to cover. Shares are up 12.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Chevron as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • CVX's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 1.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • CVX's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $10,316.00 million or 33.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.02%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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